Welcome to the Jungle

If you are interested in investing in real estate, whether it’s buy-and-hold or fix-and-flip or both, you will soon learn that it can’t happen without the help of others.  However, just because people want to help you, doesn’t mean all those people have your best interest at heart.

Understanding how everyone works together will help you to become a successful investor. Failing to understand, on the other hand, can cost you precious time and money.

The first thing you need to know is that everyone involved in your deal has their own agenda.  Here’s what you need to know about the agendas you will encounter out there in the real estate “jungle.”

  1. Real Estate Agents – They make their money through commissions on either the purchase or the sale of a property. Ideally, you want to work with an agent who understands investing from their own experience. Do they have their own rentals? Have they ever flipped a house? Who do they know that can be a resource to you? A good agent can make your life MUCH easier, so make sure they understand your goals.
    • However, keep in mind that YOU employ THEM. Ultimately, YOU are responsible for your own investments. They can make money on the purchase and sale of your property even if your profit gets eaten up by rehab expenses or holding costs.
    • On that note, just because a property looks like a deal to your agent, doesn’t mean that it is a deal for you, so do your own due diligence.
  2. Wholesalers – These are the deal-hunters. They may or may not be licensed real estate agents. Their goal is to lock in a deal that they can sell for a “finder’s fee” to an investor who needs a deal. They make money through the fee (and sometimes through a commission as well.)
    • How they get their deals is a little like how hot dogs are made – do you really want to know? We’ll suffice it to say they spend a lot of time and money marketing to potential buyers. The good ones develop systems and have a good reputation of delivering good deals that result in a good return for the investor.  The bad ones care little about what happens after they collect their fee and will try to sell, sell, sell their deal even if it isn’t any good.  DON’T get sold on a bad deal.
  3. Contractors – You need them to make the “magic” happen. Finding a good contractor with whom you work well is a challenge, but necessary if you want to rehab for profit.
    • The ideal contractor will understand your end goal, whether it be fix and flip or buy and hold and perform accordingly. They will also want to build a long-term relationship with you in order to earn your future business.
    • Treat them with respect if you want that respect to be returned. Pay them fairly and in a timely manner. 
  4. Buyers/Tenants – These are the people you aim to serve, they are your “customers.”
    • If your customer agrees to the value you place on your efforts they will pay you what you want. If not, you will have to drop your price. Therefore, it is important to research your desired customer. What are they looking for? What features matter most to them? What isn’t so important? Your goal is deliver a desirable product while maintaining a decent profit. If you can’t deliver, then it might be better to move on to a different deal.

While there are going to be more people involved, these are the big players you need to learn to work with in order to be successful as a real estate investor. Every business is a people business, so the better you understand the people you work with (and what motivates them) the better.

Evania Ku

Invest Success